CMP’s proposal to discriminate against solar customers

UPDATE! CMP has agreed to a partial settlement, which effectively kills the controversial standby fee.  Click here for more details.

As reported by the Portland Press Herald and Maine Biz, Central Maine Power (CMP) is proposing a major rate increase and rate design change that will affect nearly all of their customers in Maine.

In the crosshairs of this change is a discriminatory rate structure that will penalize customers who wish to save money by installing solar panels and reducing their use with efficiency measures.

What is CMP Proposing?

The Rate Design Case is a complicated one with many different facets affecting virtually every energy consumer in Maine in some way. In addition to raising rates overall, there are two elements of CMP’s proposal which are really concerning to people concerned about renewable energy, in terms of the message they send to consumers and their likely effect on future energy use in Maine.

The first change is that CMP wants to significantly increase the fixed monthly charges for their residential and small commercial customers. They propose to offset most of this increase by simultaneously reducing some of the variable (kw-hr based) charges for those customers, but the problem with this proposal is that it takes away your individual control of your electric bill. If fixed charges make up more of your CMP bill, you will no longer have the ability to control that bill through your own usage choices or through investments in efficiency and renewable energy. As written, the CMP proposal will raise the current fixed fee in a customer’s bill from $9.36 to roughly $20 over five years.

The second really problematic piece of CMP’s rate proposal is their desire to charge customers of renewable energy systems a separate ‘standby charge’ to penalize them for making some of their own energy. The utility argues that it needs that charge in order to recover its costs to serve those customers, but the reality is that this standby charge is essentially an attempt to punish customers for making investments in on-site energy generation and is part of an organized corporate attack on solar energy. CMP’s punitive ‘standby’ charge would raise the average residential solar customer’s bill by an ADDITIONAL $25/month over and above the higher ‘fixed’ fees which CMP is also proposing.

Utilities are terrified by the widespread adoption of renewable energy because customers producing their own power disrupts their monopoly business model. Most observers also agree that the standby charge is actually illegal here in Maine, at least for solar customers, where we have a state law that prohibits discrimination by the utility against customers who install net metered solar systems.

What CMP has proposed: Revenue Rate Testimony, MCOS Study

Who is CMP? Do they provide my power?

Central Maine Power is a wholly owned subsidiary of the Iberdrola, a Spanish energy conglomerate. They are the monopoly electric utility serving most of the southern 2/3rd of Maine. They do not generate any electricity, they just own the poles and the wires that bring the electricity to your home or business. Because they are a monopoly and provide an essential public function, CMP is regulated by the Maine Public Utilities Commision (PUC), who is supposed to make sure that the company provides reasonable quality service at fair prices to all its customers and that they don’t behave in a way that is predatory.

How do these proposals affects rate payers generally?

The proposal has negative consequences for Maine at both the individual and the grid level. As an individual rate payer, the proposal will reduce your ability to manage your electric bill through changes in behavior or investments in efficiency or renewable energy. Under the proposal, some ratepayers (those that currently already have very high electric usage) may find their bill actually goes down, while others (those that use less energy) will see their bill go up.

On the grid-wide level, because the proposal sends the wrong market signals to energy consumers, it will lead to higher usage and higher costs for everyone in the long run. By eliminating volumetric charges and transitioning to (higher) fixed rates, CMP’s proposal will eliminate the incentive for customers to reduce their peak usage or overall consumption. As a result, the use of the electric grid will be less efficient and will likely require construction of additional expensive infrastructure that would otherwise have been unnecessary.  This is contrary to state energy policy goals and is not in the best interest of ratepayers or the State of Maine.

While discouraging distributed generation and energy efficiency makes perfect sense for a utility investor whose makes more money when system load increases and the utility can justify building massive infrastructure projects with generous guaranteed returns, it is clearly not in the public interest. When utility rate structures are designed to disincentive conservation and distributed generation, ratepayers are financially harmed twice. They pay for the increased energy they consume and they pay for the otherwise unnecessary infrastructure that the transmission and distribution utility will build as a result of the increased demand.

How do these proposals affects distributed solar and efficiency measures?

Increasing fixed charges and reducing volumetric charges will tend to decrease the economic benefits (lengthen the simple payback) of all kinds of efficiency improvements from lighting upgrades, to heat or water heating improvements, appliance replacements and investments in renewable energy.

Replacing volumetric charges in residential and small commercial rates is a back door attack on net energy billing, also commonly called ‘net metering,’ which is currently the only substantive policy left in Maine that supports small renewable energy systems. Under the PUC rules, Chapter 313, utility customers with small distributed solar energy systems (under 660 kilowatts) are permitted to connect those systems behind the utility meter to offset the customer’s load with locally generated renewable energy. When solar production exceeds the load over the course of a billing period, the excess production is exported to the grid and generates a credit on the utility bill at the customer’s per kWh rate. Under net metering, the utility is not required to pay the solar system owner for the excess power produced, but is required to grant them a credit on their utility bill which can be carried forward for up to one year in order to offset future load (e.g. when a solar system doesn’t generate as much electricity, such as during winter months).

Under net energy billing, excess solar production is credited only at the customer’s per kWh rate (volumetric charges), not against any fixed costs. As such, any rate design changes that replace volumetric charges with fixed fees reduces the benefits of net metering and makes solar system economics far more challenging and, in the case of CMP’s proposal, will extend payback periods by several years (see below).  The same problem happens with energy efficiency investments.

But shouldn’t net metered solar customers help pay for the grid, after all, they need it too?

Solar advocates agree that solar customers who use the grid to enable their solar system ought to pay their fair share of the costs of that grid. After all, we rely on the grid on cloudy days or in the evening to provide us continuous and reliable power.

The disagreement is about what constitutes a ‘fair share’ and how those costs are billed. It is our belief that the fixed costs of serving a customer (reading the meter, sending out bills) ought to be reflected in the basic customer charge that all utility customers already pay on a monthly basis. And that charge should be the same for all customers of a particular rate class.

There already exists a minimum monthly charge of about $10 a month, which is reasonable and fair. All customers (including solar customers who have no net energy consumption over the course of the year) currently pay this minimum monthly service charge for the right to be a CMP customer. That is reasonable and we have no objection to that.

What is unreasonable, and also plainly unlawful, is to specifically discriminate against some customers within a rate class simply because they happen to have a net metered solar system, and to impose an extra surcharge on those customers even though their usage profile may be indistinguishable from another customer that doesn’t happen to have solar installed.

The CMP proposal to discriminate against solar customers is particularly egregious because in addition to the basic equity and legality question above, it ignores the fact that solar customers, on average, have a reduced energy consumption at times of the system’s peak load. Wholesale energy is expensive at times of peak load (hot days in summer when air conditioners are running), which serves to drive up the overall utility costs to everyone. However – solar panels help to LOWER that peak load (since solar panels, by definition, generate power when the sun is shining) and so in fact produce valuable wholesale energy and pump it into the grid when it is needed the most.

A common sense rate design that is fair and based on cost-causation principals would compensate, not penalize, those customers for their contribution to lowering overall costs.

Who is representing me – the typical homeowner interested in energy efficiency or renewable energy in this process?

In theory, any affected party has the right to participate in the PUC process by filing as an intervener in the case. In practice, the duration and complexity of the case (roughly 10 months, hundreds of filing with thousands and thousands of pages of documents and weeks of hearings) means that typically only organizations with substantial resources (and usually paid lobbyists) actually participate. The interest of the rate payers generally is supposed to be represented in the case by the Office of the Public Advocate (OPA), though their priorities may or may not align perfectly with yours.

Other organizations that have been granted status as interveners in this case and are advocating robustly for energy efficiency and renewables include: The Natural Resources Council of MaineEnvironment North EastThe Maine Association of Building Efficiency Professionals (MABEP), the Industrial Energy Consumer Group (IECG), and the Maine Independent Colleges Association (MICA).  The independent Efficiency Maine trust is also an intervener in the case.

What can I do?

Well over a hundred people attended each public PUC hearing, held April 2 and April 3, 2014. Dozens of people testified against the proposed changes.  If you missed the hearing, you may still submit sworn testimony using PUC’s online web portal.